Questionnaire for the Draft Framework Guideline on

Draft Framework Guidelines on Harmonised transmission tariff structures

for the European Gas Transmission Networks Public Consultation - Questionnaire

1

Questionnaire for the Draft Framework Guideline on Harmonised transmission

tariff structures1

Please provide the Agency with your full contact details, allowing us to revert to you with specific

questions concerning your answers.

Name: Marta Kamola-Martines

Position held: European Affairs

Phone number and e-mail: [email protected]

Name and address of the company you represent:

Storengy SA

12, rue Raoul Nordling

92270 Bois Colombes, France

Please indicate, if your company/organisation is:

a. European association

b. National association

c. TSO

d. Shipper or energy trading entity

e. End-user

f. Other (e.g. Power Exchanges, Storage Operator etc.), namely: storage system operator

Please provide, if relevant, reasoned indication if you wish to consider (part of) your response as

confidential2.

1 Further also referred to as “FG”. The resulting Network code on Harmonised transmission tariff structures

is further also referred to as “NC”. 2 The Agency shall carefully consider all responses received (whether confidential or not) subject to the

provision that anonymous responses or responses from respondents who do not want their identity to be made

public will generally not be taken into consideration. The Agency will make public the number of responses



2

When writing your responses could you include how your arguments contribute to the objectives set

out in section 1.2 of the draft Framework Guideline. For definitions please consult section 1.3 of the

draft FG.

1. General provisions. Scope, application, definitions and implementation (Chapter 1 of the draft

Framework Guideline)

1.1. Please explain whether any of aspects of the application of the draft FG (NC) to existing

contracts would cause disproportionate effects on gas business in relation to 3rd Package

objectives? Please give reasons for your answer, including any quantitative evidence, tables and

examples (if required, under confidentiality).

First and foremost, Storengy would like to stress that while proposing new rules for transmission

tariff setting at EU level great care should be taken so as not to hamper the competitiveness of

natural gas in Europe by undue tariff increase. In other words, the new framework to be

established by the Framework Guidelines/Network Code should not lead to global net increase

of costs to be borne by shippers. Moreover, any new transmission tariff rules should be in line

with the Third Package objectives of competition, non-discrimination, cost-effectiveness and

avoidance of cross-subsidization. Moreover, they should not hamper the security of gas supply.

We would like to recall that the “Third Package process” was established to tackle cross-border

inter-TSO issues rather than establishing new rules for other infrastructures. Nevertheless, in an

Entry/Exit system, any change of rules for cross-border points may likely have an impact on

adjacent infrastructures, such as storage. It is thus vital that this impact is not detrimental to

such infrastructures and that their attractiveness is preserved in order to ensure a high level of

security of supply. In that regard the application of the new rules to be established on the basis

of the draft Framework Guidelines should not provoke discriminatory effects on storage. That is

received to formal consultations, the names of the respondents, and all non-confidential responses.

Respondents may request that information or data in their responses is treated as confidential. The Agency

will assess, in co-ordination with the respondents requesting confidentiality, which information or data shall

not be made public and may request from the respondents an explanation of their confidentiality interests and

a non-confidential version of their response for publication. The Agency will evaluate confidential responses

as transparently as possible without undermining the respondents’ confidentiality interests.



3

why transmission-storage entry/exit points should be treated differently from other points as is

already recognized by the draft Framework Guidelines. This should be confirmed in the final

version of the Guidelines. Moreover, in order to avoid disproportionate effects on storage, it

should be ensured that unjustified cost shifts between cross-border and transmission-storage

points are avoided and that storage users have sufficient visibility on the transmission tariffs on

storage entry/exit points, in other words that these tariffs do not fluctuate from one year to

another.

1.2. Please explain if any further definitions should be added for clarity of the FG (NC)?

No further definitions are necessary.

1.3. Please suggest the top-5 core indicators3 for monitoring the future EU-wide implementation

of the future tariff FG (NC)? ACER and ENTSO-G both have legal obligations to monitor NC

implementation (in accordance with Article 9 (1) and Article 8(8) of Regulation (EC) No 715/2009

respectively).

No answer.

2. Cost allocation and determination of the reference price (Chapter 2 of the draft Framework

Guideline)

2.1. Transparency provisions

2.1.1 Do you agree with the level of harmonization proposed for the transparency in

relation to tariffication methodologies4?

3 An example of a core indicator could be e.g. the relative size of (positive or negative) Regulatory account in

comparison to overall Tariff revenues, indicating under- or over recovery of the tariff regime in a specific entry- and exit zone. 4 Article 18(2) of Regulation 715/2009 states that: “In order to ensure transparent […] tariffs […],

transmission system operators or relevant national authorities shall publish reasonably and sufficiently detailed information on tariff derivation, methodology and structure”. The proposed text in the draft FG seeks to ensure such reasonable and sufficient detailed information.



4

a. Yes, because......;

b. No, because......;

c. No opinion

Please give reasons for your answer, including any quantitative evidence, tables and

examples. Please specify if (and how) the proposed text in the draft FG should be further

detailed and clarified.

2.1.2 Would you support additional requirement(s) to ensure “reasonable and sufficiently”

detailed tariff information5? For example, one could consider including a provision

such as: “the transmission system operators or relevant national authorities shall

provide additional information if a significant tariff fluctuation is expected on a

specific or on all entry- and exit points”.

a. Yes, such as......;

b. No, because......;6

c. No opinion


examples. Would you propose alternative levels of harmonization or wording to that

proposed?

2.2 Cost allocation and reference price setting methodology, general questions.

5 Article 18(2) of Regulation 715/2009 states that: “In order to ensure transparent […] tariffs […],

transmission system operators or relevant national authorities shall publish reasonably and sufficiently detailed information on tariff derivation, methodology and structure”. 6 Please consider specifically if there are legal barriers in your jurisdiction(s), preventing such level of

transparency. E.g. it might be that the transmission system operators or relevant national authorities could be liable for such a ‘prediction’.



5

2.2.1 Do you agree with proposed level of harmonization for the reference price setting

methodology, aiming for same methodology for all types of network users per one

entry-exit zone?



c. No opinion.


examples. Would you propose alternative levels of harmonization to that proposed?

2.3 Cost allocation and the Reference price setting methodology, detailed questions.

2.3.1 Do you agree with proposed option for setting reference prices for entry capacity i.e.

to have methodology based on major cost driver (e.g. distance) unless use of equal

tariffs can be justified?



c. No opinion


examples. Would you propose alternative measures or e.g. additional cost drivers’

examples as to those proposed?

Storengy would like to stress that irrespectively of the chosen option for setting

reference prices for entry/exit capacity, transmission tariffs to/from storage should be

treated differently, as argued in section 2.4 below.

2.3.2 Do you agree with proposed option for setting Reference prices for exit capacity i.e. to

have methodology based on major cost driver (e.g. distance) unless use of equal tariffs

can be justified?


b. No, because......

c. No opinion

Please give reasons for your answer. Would you propose alternative measures or e.g.

additional cost drivers’ examples as to those proposed?



6

2.3.3. Do you agree with the cost allocation principle that revenue from entry points should

equal 50% of revenue from all entry and exit points?



c. No opinion

Storengy supports ACER’s proposal to treat transmission entry/exit tariffs to/from

storage differently by applying a “discount”. In view of this proposal, we do not have an

opinion on the question above.

Please give reasons your answer, including any quantitative evidence, tables and

examples. Would you propose alternative levels of harmonization to that proposed?

Please specifically consider how this affects cost-reflectivity and cross-subsidies between

different types of network users, and quantify in which circumstances a deviation from

such a ‘50%’ rule would be necessary, and why.

2.3.4. Do you agree with application of the proposed options for setting reference prices to

all entry and exit points (without any separate mechanism for the domestic points,

whilst ensuring no discrimination between domestic and cross-border network usage)?



c. No opinion


examples. Would you propose an alternative option to that proposed?

2.4 Pricing of entry- and exit capacity on the transmission network to and from gas storage facilities

(see also questions under ‘9’ Locational signals).

2.4.1. Do you agree with proposed option to base tariffs for entry and exit capacity on the

transmission network to and from gas storage facilities at an adequate discount to other

entry and exit points on the TSO?

a. Yes, because......



7

As stated at the beginning of this consultation paper, Storengy is of the opinion that any

new European rules for transmission tariffs should not affect the competitiveness of natural

gas in Europe by undue tariff increase. Moreover, they should be in line with the Third

Package objectives of non-discrimination, cost-effectiveness and avoidance of cross-

subsidization. Given that the existence of entry/exist system introduced by the European

legislation inevitably creates a relationship between cross-border transmission points and

domestic points, any discriminatory effects on adjacent infrastructures, such as storage,

should be avoided.

In this context, and in line with ACER, we would like to stress that transmission tariffs for

entry and exit capacity to and from storage facilities should be treated differently.

Therefore, we welcome the proposal to base transmission tariffs to/from storage at a

“discount”. At this point, however, we would like to note that the word ”discount” should

not imply any temporary or a one-off solution. Rather, it should be a regular approach

ensuring that an appropriate transmission tariff level is established at interconnection

points with storage which will reflect the added value of storage and the underlying

economics.

An adequate tariff “discount” (lower or a zero tariff) for transmission-storage points is

necessary to avoid that storage users pay entry and exit tariffs twice. As recognized by both

Brattle and ACER, storage, unlike other infrastructures, is not a net source of supply or

demand as it shifts consumption overtime : the treatment of transmission entry/exit tariffs

to/from storage as any other entry/exit point would lead to double charging of storage

users thus generating cross-subsidy between different system users and potentially

discouraging shippers from contracting storage, to the detriment of security of supply.

Moreover, a “discount” on transmission-storage points is justified given the particular role

that storage plays in the network. In fact, there are several reasons why storage should be

treated differently from other infrastructures and this is recognized in both the Brattle

report and the ACER Impact Assessment, in particular:

Firstly, storage helps to avoid inefficient network investments and to bring down

network costs : namely, it allows to optimize the size of transmission pipelines by

lowering the peak load that the network would otherwise need to be tailored to;

furthermore, storage contributes to lowering operational costs (linked in particular

with compression) of the TSO as it provides additional pressure to the network. These

avoided costs allow to set lower entry/exit tariffs at other interconnection points of

the network thus providing a net benefit to system users at large.



8

Secondly, storage is a physical tool located within the system that provides

complementary support service to the network : namely, it provides the flexibility

necessary for the integrity of the network and may support market-based congestion

management solutions thus increasing system efficiency.

Finally, storage plays a vital role for security of supply, both on a seasonal basis as well

as at peak times, ensuring the continuity of gas supply to final customers, which is

paramount in the case of a shortage of physical commodity in the market.


c. No opinion, because.....



2.4.2. Do you agree with harmonization of such a discount across all storage points in the EU?

Please reason your answer, including any quantitative evidence, tables and examples.

Please also specify, if you believe that harmonization should go even further, e.g.

benchmarking absolute entry-exit tariff levels for gas storage sites.



Storengy is against harmonizing such “discounts” across all transmission-storage points in

Europe. Rather, we believe that there could be merit in having common underlying

principles to determine the appropriate level of transmission tariffs to/from storage. These

should be flexible enough and should take into account at least the following:

The interdependency and the reciprocal service between transmission and storage

infrastructures:

As already noted, storage is a physical tool located within the transmission system that

provides complementary service to the network. On the other hand, the extent to which

storage can be used does not depend solely on its characteristics but also on its physical

accessibility. Therefore, the methodology underlying the determination of the discount,

should take into account:



9

- the conditions of access to storage provided by the transmission infrastructure, i.e.

the existence or absence of transmission restrictions which may limit the effective

usage of storage;

- the characteristics of the service rendered by storage to the network, notably in

terms of the flexibility: typically, a fast-cycle storage will offer a greater degree of

flexibility than seasonal storage facilities thus offering greater benefits for system

integrity and security of supply; moreover, storage located close to the core of the

network will likely provide greater support to the system including, in particular, in

the event of congestion.

The contribution of storage to system efficiency and optimization, notably in terms of

the avoided investment and costs of the transmission network.


Please give reasons for your answer, including any quantitative evidence, tables and examples.

Would you propose an alternative option to that proposed?

2.4.3. If you prefer harmonization for an ‘adequate’ discount, which level of such a discount

applied to firm capacity level do you advocate?

a. 0, because….

b. 0-30%, because......;

c. 30-50%, because......

d. 50-80%, because…

e. 80-100%, because….

f. No opinion or other suggestions, because....

We are not in favour of harmonizing the “discount” across Europe but rather of having a

common underlying principles to be taken into account in the determination of

transmission tariffs to/from storage. => Please refer to the answer to the question 2.4.2

above.

Please give reasons for your answer, including how you would suggest to calculate the

discount, including any quantitative evidence, tables and examples, e.g. based on current

practice in EU known to you. Would you propose alternative measures as to those

proposed?



10

2.4.4. What are your views on harmonization of tariff measures, leading to harmonization of

transmission tariff levels across all storage points in the EU (instead of harmonizing a

discount across all storage points in the EU)?

Please reason your answer, including any quantitative evidence, tables and examples.

Please consider question 2.4.2, where we also asked about your ideas on benchmarking of

absolute entry-exit tariff levels for gas storage sites.

Storengy is not in favour of harmonization of absolute transmission tariff levels for

entry/exit points to/from storage but rather of having a common underlying principles to

be taken into account in the determination of transmission tariffs to/from storage. =>

Please refer to the response to the question 2.4.2. above.

3. Revenue recovery (Chapter 3 of the draft Framework Guideline)

3.1. General – interdependency questions.

Introduction.

Revenue recovery (chapter 3), Reserve price for firm standard capacity products (chapter 4.1) and

Payable price (chapter 7) cannot be considered separately. The main interaction is that a regime where

auctions are used will have a greater level of uncertainty in revenues collected from auctions.

The use of specified in FG chapters 3, 4 and 7 policy options need to work together to meet the

objectives of the FG whilst ensuring the TSO recovers their allowed revenues. There is a possibility that is

in practice there might be under- or over recoveries, especially as a consequence of policy options

regarding short term reserve prices and payable price. Therefore there will need to be a Regulatory

Account to ensure the TSOs recover their allowed revenues.

3.1.1. Do you agree that the current draft FG proposals on Reserve prices for short term

products, on revenue recovery and on payable price are consistent together?



c. No opinion

Please give a brief explanation for your answer, including the beneficial and detrimental

interactions you see. Would you propose alternative combinations, and if so please reason

why?



11

3.1.2. Are the current draft FG proposals on Reserve prices for short term products, on

revenue recovery and on payable price properly addressing the ambition for the

pricing of transmission capacity to strike the right balance between facilitating short-

term gas trading on one hand and providing long-term signals for covering costs and

promoting efficient investments on the other?



c. No opinion

Please give a brief explanation for your answer, including the beneficial and detrimental

interactions you see.

3.2 Regulatory account

3.2.1 Do you agree with the principle to set reference prices to minimise the difference

between allowed and collected revenues?



c. No opinion

Storengy would like to recall that transmission tariffs to/from storage should be

treated differently from other points. This treatment should be taken into account first

before deciding on reference prices at other entry/exit points.



3.2.2 Do you agree with proposed level of harmonization of using the regulatory account?



c. No opinion





12

3.2.3 Do you agree that NRAs should determine or approve how often and how fast the

regulatory account has to be reconciled on a national level, whilst preserving balance

between timely cost recovery and sudden adjustments to tariffs?



c. No opinion



3.2.4 What is your view on including the option to use the Regulatory Account (including the

potential over-recoveries from auction premium) to contribute to solving congestion?

How could this be done, especially in view of principles of non-discrimination and cost-

reflectivity? Please give reasons for your answer, including any quantitative evidence,

tables and examples.

No answer.

3.3. Reconciliation of Regulatory accounts.

3.3.1. Which option for the reconciliation of regulatory accounts do you prefer?

a. Option 1; because….

b. Option 2; because….If preferred, what percentage of revenues should be recovered

through capacity charges and why?

c. No opinion



3.3.2. In line with the interdependency discussion above in question 3.1, what are your views on

recovering revenues by means of a separate charge set at the start of the gas year with

the aim of minimising the amount that goes into the regulatory account? This charge

could be based either on gas flows (commodity) or capacity bookings (capacity). Then the

regulatory account would be reconciled through the reserve or reference price. See chapter

3 of the draft FG.



13

No answer.

3.3.3. Do you agree with application of the option on reconciling regulatory account to all entry

and exit points (both domestic and cross-border)?



c. No opinion

Storengy would like to recall that transmission tariffs to/from storage should be treated

differently from other points. This treatment should be taken into account first before

deciding on reference prices at other entry/exit points.



3.3.4. Do you agree that the regulatory account should be recovered by splitting the total

under- or over- recovery across all entry and exit points in the same proportion as set out

in the cost allocation methodology? For example if the cost allocation methodology is a

50:50 split then 50% of all under- or over- recovery will be from the entry points and 50%

from the exit points.


b. No, because.......

c. No opinion

In your explanations please include any quantitative evidence, tables and examples, where

appropriate. Would you propose alternative application as to that proposed? Please explain (if

relevant) the alternative proposals and reasons why.

4. Reserve prices (Chapter 4 of the Framework Guideline)

NB: when answering, please specify if your answer differs for daily, monthly and/or quarterly products.

4.1 General.

4.1.1 Do you consider it sufficient to have rules on firm, interruptible and non-physical backhaul capacity products or are you aware of other capacity products that should be addressed in the FG? a. Yes, because......;



14


c. No opinion



4.2 Reserve prices (firm)

4.2.1 Do you agree with proposed level of harmonization?



c. No opinion



4.2.2 Do you agree with proposed option for the Reserve price for short-term products

including the possibility that the national regulatory authority may decide to allow for

higher short-term prices that may apply (via multiplier higher than one, but not higher

than 1.5) if there is risk of significant under-recovery of allowed revenues?



c. No opinion


examples. Would you propose an alternative option to that proposed? Please specifically

consider the time aspects: how, when and for how long this would apply. Please specifically

address if maximum multiplier “1.5” should be set lower or higher, and if in time an EU-wide

evaluation, leading to reset possibility of such a maximum multiplier, should be explicitly

introduced, or should such a reset possibility only apply to interconnection points where no

premia to reserve prices are offered during the auctions. Would you consider that a ‘reset’

possibility for multiplier-levels should be specified at EU-wide level. Also please specify with

examples, what in your view to be considered as such a significant under-recovery? Please

consider also specifically why you believe that risk of significant under-recovery could not be

mitigated through use of appropriate seasonal factors.



15

4.2.3 Do you agree with application of the proposal on short-term Reserve prices to entry and

exit points where the Network Code on CAM applies, i.e. interconnection points only?

a. Yes

Storengy has no opinion on the content of the proposal but we do agree that

transmission entry/exit points to/from storage should not be concerned by it. As

stated earlier, transmission tariffs to/from storage should be treated differently

so as not to impinge on the attractiveness of storage.


c. No opinion, because....:



4.2.4. What criteria would you propose to set the Reserve price for short-term products that

will be higher than the price of an annual product, to interconnection points?

No answer.


examples. Please include in your answer your views on use of seasonal factors.

4.2.5. Would you agree with using Seasonality (or other criteria, which you may suggest) of

the systems as criteria to set the Reserve price for short-term products that will be

higher than the price of an annual product, to interconnection points?



c. No opinion



4.3 Reserve prices (interruptible)



16

4.3.1 Do you agree with proposed option to set Interruptible Reserve prices at a discount to

firm capacity where the discount is based on the likelihood of interruption, and to

recalculate once a year?



c. No opinion



4.3.2 If you prefer a fixed discount, which level of such a discount applied to firm capacity

level do you advocate?

a. 0, because….; whereas risk of interruption is.....;

b. 0-30%, because......; whereas risk of interruption is.....;

c. 30-50%, because......; whereas risk of interruption is.....;

d. 50-80%, because…; whereas risk of interruption is.....;

e. 80-100%, because….; whereas risk of interruption is.....;

f. ......% (customized value, as above values are chosen arbitrary to allow for a global

grouping of answers), because….; whereas risk of interruption is.....; and risk of interruption

is calculated as follows:.......

No answer.

Please give reasons for your answer, including how you would calculate the discount, risk of

interruption and link the discount to risk of interruption, including any quantitative

evidence, tables and examples. Would you propose alternative measures as to those

proposed?

4.3.3 Do you agree with application of the proposed option to entry and exit points where the

Network Code on CAM applies, i.e. interconnection points only?

a. Yes.


transmission entry/exit points to/from storage should not be concerned by it. As stated

earlier, transmission tariffs to/from storage should be treated differently so as not to

impinge on the attractiveness of storage.



17





4.4. Reserve price (backhaul)




c. No opinion



4.4.2 Do you agree with proposed option to set backhaul prices at a discount to firm capacity

level so that Reserve prices reflect the level of actual marginal costs (= IT and administrative

costs)?



c. No opinion

Please give rasons for your answer, including any quantitative evidence, tables and

examples. Would you propose an alternative option to that proposed? Please also

specifically address and propose mitigation of consequences of such a policy to existing

forward flow shippers as well as positive contribution to potentially reduced need for

additional capacity construction.

4.4.3 Do you agree with application of the proposed option on backhaul capacity pricing to

entry and exit points where the Network Code on CAM applies i.e. interconnection

points only?

a. Yes





18

stated earlier, transmission tariffs to/from storage should be treated differently so

as not to impinge on the attractiveness of storage.





5. Virtual IPs

Do you support the proposed option for Reserve price in Virtual IPs as EU-wide standard? Please

reason your answer, including any quantitative evidence, tables and examples on balance between

cost-reflectivity and cross border trade stimulation.



c. No opinion



6. Bundled capacity products

6.1 Reserve price (Bundled)




c. No opinion



6.1.2. Do you agree with the proposed option that the sum of Reserve prices for unbundled

capacity is used as bundled Reserve price?





19

c. No opinion



6.1.3 Do you agree with application of specified the proposal to entry and exit points where

the Network Code on CAM applies i.e. interconnection points only?

a. Yes



stated earlier, transmission tariffs to/from storage should be treated differently so as

not to impinge on the attractiveness of storage.


c. No opinion, because....:



6.2. Do you support the proposed option for Reserve price (if unbundled) as the EU-wide

standard? Please give reasons for your answer, including any quantitative evidence, tables

and examples on balance between cost-reflectivity and cross border trade stimulation. We

encourage you to specify if you support the Unbundled Reserve price being higher to

support bundling of products.



c. No opinion

Would you propose alternative measures to those proposed?

6.3 The Network Code on Tariffs shall specify that the revenues from Reserve price of bundled capacity products shall be attributed to the TSOs proportionally to the Reserve prices of their respective capacities in the Bundled Capacity. The revenues from the auction premium from bundled capacity above the Reserve price shall be split according to agreement between the relevant national regulatory authorities. Furthermore, the Network Code on Tariffs shall in the



20

case that no agreement is concluded before the auction, specify that the revenues from the auction premium shall be split equally between the TSOs.

6.3.1 Do you agree with proposed level of harmonization in that approach above?



c. No opinion



6.3.2 Do you agree with proposed option for splitting auction revenues from bundled products

to the relevant TSOs?



c. No opinion



6.3.3 Do you agree with application of the proposal to entry and exit points where the

Network Code on CAM applies i.e. interconnection points only?

a. Yes



stated earlier, transmission tariffs to/from storage should be treated differently so as

not to impinge on the attractiveness of storage.

b. No, because…






21

7. Payable price




c. No opinion


Would you propose an alternative option to that proposed, please also consider the link to

question 3.1?

7.1.2 Do you agree with the proposed option to set payable price equal to the current Reserve price

for year in which capacity is used plus any premium?

a. Yes, because…


c. No opinion



7.1.3 Do you agree with the application of specified options regarding payable price to entry and exit

points where the Network Code on CAM applies i.e. interconnection points only?

a. Yes

Storengy has no opinion on the content of the proposal but we do agree that transmission

entry/exit points to/from storage should not be concerned by it. As stated earlier,

transmission tariffs to/from storage should be treated differently so as not to impinge on the

attractiveness of storage. Moreover, we would like to recall that auctions apply to IPs under

the CAM Network Code only.

b. No, because…


Please reason which Option you prefer, including any quantitative evidence, tables and examples.

Would you propose alternative measures as to those proposed?

8. Incremental capacity (no explicit chapter in draft FG, implications at least to chapters 2/3

foreseen).



22

In EC letter ACER is invited to consider in the Impact Assessment if tariffication principles should be

developed in the Framework Guideline for Incremental Capacity.

Incremental capacity is defined as capacity that is provided (by investment) on top of capacity at an

existing IP, after a ‘market test’ has been met. The market test sets out what the criteria are for

providing incremental capacity. The key issue from ‘incremental capacity’ for tariffication is that

incremental capacity can expose consumers to costs incurred by TSOs which may be problematic if

incremental capacity costs are not fully recovered by users triggering the capacity provision as a result of

the market test.

Therefore it is very important how economic test(s) (principles) are constructed at country- or even

broader EU level, to get a balance between timely increases in capacity, efficient increases in capacity

and under-recovery of revenues.

We note that in CEER-roundtable 2012 discussions on Incremental capacity experts have noted that

harmonization of the specific parameters in the market test might not be needed, but rather a

consistent approach to the principle of having a market test to trigger Incremental capacity may be

needed at the EU level7.

8.1. Please provide evidence of concrete problems with the current arrangements for incremental

capacities, whereas these problems affect tariff structures in EU. Any quantitative evidence,

tables and examples (if necessary, subject to confidentiality) are welcomed.

No answer.

8.2. Please therefore consider if harmonization, or partial harmonization of any parameters in the

“market test” is appropriate within Tariffication principles at EU-level ?

7 Please consider the ongoing consultation on Incremental capacity issues by CEER, available via

http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_CONSULT/OPEN%20PUBLIC%20CONSULTATIONS/Investment%20Procedures%20for%20Gas%20Infrastructure . Please also note that ACER will work with CEER during 2012 to further analyze the issues in this area.

http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_CONSULT/OPEN%20PUBLIC%20CONSULTATIONS/Investment%20Procedures%20for%20Gas%20Infrastructure





23

No answer.

Please give reasons for your answer, including any quantitative evidence, tables and examples. Please

e.g. specifically address if FG/NC should set minimum and maximum thresholds for such a “market test”,

whilst NRAs would set actual thresholds at national level. Please also address how such thresholds for a

“market test” should take account of positive externalities (such as Security of Supply), as well as of the

risk that incremental capacity can expose consumers to costs incurred by TSOs which may be

problematic if incremental capacity costs are not fully recovered by users triggering the capacity

provision as a result of the market test.

8.3. Are there any other elements required in the Network Code on transmission tariff structures, to

accommodate incremental capacity offer (e.g. influence on regulatory accounts, regulatory

periods length, requirement for a fixed for period of years tariffs).

No answer.

Please give reasons for your answer, including any quantitative evidence, tables and examples8.

9. Usage of locational signals (no explicit chapter in FG, implications at least to chapters 2/3/4

foreseen).

Locational signals are considered to contribute to shippers using the system in a way which

minimises future costs. Locational signals can be defined as specific tariff measures for specific entry

or exit points in the system.

8 Please specify per below option, if your answer differs, if the approach to Incremental capacity identification

(and, where applicable, allocation) would be based on 1 of the following options:

Open Seasons (according to 2007 GGPOS), Coordinated Open Seasons (in light of the experience gained in the years since 2007) Identification via TYNDP, GRIPs and/or national TYNDPs, Regular integrated capacity auction for incremental and existing capacity, Incremental capacity auction if demand is identified in a regular process, and One time integrated auctions.



24

In EC letter ACER is invited to consider in IA if locational signals should be developed in the Network

Code on transmission tariff structures. For example to address decisions on locating gas-fired power

plants and/or gas storages and/or LNG terminals.

9.1 Please provide evidence of concrete problems with the current arrangements for locational

signals. Any quantitative evidence, tables and examples (if necessary, subject to confidentiality)

are welcomed.

No answer.

9.2. Are there any other elements required in the Network Code on transmission tariff structures

to accommodate locational signals?

No answer.


9.3. Please consider whether the chapter on ‘Reference price’ should have more options added in

regard to use of locational signals. Please consider specifically how tariff structures can be

used to signal investment for e.g. gas-fired power plants, storages, LNG terminals, etc.

In line with our responses in section 2.4. Storengy is of the opinion that transmission tariffs

to/from storage should be set in a way that provides the proper locational signals. This will

require consideration of a number of aspects as outlined earlier, including the physical location

of storage in relation to the core of the network (the closer the storage site is to the core of the

network, the greater the flexibility and system support offered) and the proximity to demand

centres(the closer to a storage site is to the demand centre, the greater the investment cost

avoided), etc.




25

9.4 Shorthaul as a form of ‘locational signal’ in e/e systems.

Recent THINK-study, commissioned by European Commission, recommended ‘some harmonization in natural gas transmission tarification to ensure that the breakdown of costs among grid users and among entry- and exit points respects the principle of cost-reflectiveness as much as possible. Adequate discounts on short-haul transports should be encouraged’9. Entry-exit systems require users who want to take gas onto the system and deliver it to others in the system to buy entry capacity (to allow them to flow gas from the entry point to the virtual hub) and exit capacity (to allow them to flow gas from the virtual hub to the exit point). If users want to flow significant volumes of gas from an entry point to a nearby exit point they may consider building their own pipeline between the two points if that is cheaper for the user than paying for entry and exit capacity plus any additional revenue recovery charges (as their own pipeline would also be subject to less onerous tariff regulation in general). Building additional pipelines when there is capacity available on the system may not be the most efficient way to develop the network. Whilst it must be considered that permitting construction of such a pipeline might not be a realistic option in all EU Member-States. E.g. in GB a user could decide to locate a CCGT (= Combined Cycle Gas Turbine power plant) 1 km from a large entry point and decide to build their own pipeline from the large entry point to their CCGT. This is an example of how such a concern arises in practice, stemming mainly from inefficiency of constructing an additional pipeline.

9.4.1. Should the FG have a tariff structure in place to avoid the incentive for inefficient

building of pipelines (to avoid the entry-exit system charges) described above?

a. Yes, because….. b. No, because….. c. No opinion


examples.

9.4.2. How could this tariff structure be designed?

No answer.

Please propose wording for a policy option (if needed).

9 See summary under weblink: http://www.eui.eu/Projects/THINK/Documents/Thinktopic/PB/PB201201.pdf



26

9.4.3. Should there, in order to address risk of cross-subsidies and discrimination - be a

limitation on the capacities that can be “shorthaul capacities”? Based on expert advice

on current EU-practices, following options are proposed:

a. Maximum 50 km (only distances of maximum 50 km can be considered as shorthaul

capacities)

b. Max 20% of the average gas travelling distance in the E/E system

c. Max 10% of the total capacities of a E/E system can be considered as “shorthaul”

d. Other, namely:........

No answer.


Please specifically address who should pay the difference between the shorthaul tariff and the

overall tariffs.

9.5 Specific treatment of LNG (if any) considered, in view of considering specific storage treatment

(see questions under 2.4).

LNG competes with the natural gas from other sources, like national production points or other entry

points. It could therefore be argued that any discount on the entry and exit tariffs at points where CAP

applies could produce a cross-subsidy, reducing cost reflectivity of system as a whole, and resulting in a

discriminatory effect on the cross-border trade between LNG- and IP entry users. In addition, storage –

contrary to LNG - is mostly considered as part of the system, as it uses gas, which has already ‘paid e/e

fees’. Namely, gas injected into underground storages have flowed across the system, which means it

has been charged entry/exit fees, this is not the case for LNG which is stored after it has been unloaded

from LNG-ship cargoes, before any entry fee on the transmission system is charged.

On other hand, it could be argued that LNG and Storage are both valuable flexibility tools in some EU gas

market systems (especially in systems where LNG is due to geology & geographical situation potentially

the only source of flexible gas) for shippers that should be stimulated, and similar to storage special

treatment could be envisaged (contrary to gas production entry points, which with very few exceptions

in EU, deliver much less flexibility in comparison to LNG). It must be also considered that – with similar

logic – special treatments might be required by any end-user with flexibility for the system (e.g. power

plants). In any case, justification is sought, as any special treatment must be reasoned and justified for a

category of e/e points, to ensure non-discrimination.



27

9.5.1. Do you think that tariffs for entry and exit capacity from the LNG terminal could incorporate a discount relative to other entry and exit tariffs on the TSO, similar to the proposed option for underground gas storage? a. Yes, because… b. No, because…. c. No opinion


Please specifically address who should pay the difference between such a special tariff and the

overall tariffs.

10. Effects Entry-Exit Zone mergers & Virtual IPs (no explicit chapter in FG, implications at least to

chapters 2/3 foreseen).

In the CAM network code (art 5.1(10)) Virtual Interconnection points are addressed (see draft FG,

chapter 5).

In EC letter ACER is invited to consider in IA if the effects of entry-exit zone mergers should be

developed in the Network Code on transmission tariff structures. This could address, for instance,

the topics of tariff alignment and the disappearance of interconnection points, and the

corresponding cross-border tariffs, due to the zone merger’.

Both topics affect the setting of reserve prices at IPs and, more importantly, underlying cost

allocation within and between entry-exit zones; as well as revenue recovery consequences.

10.1. Please provide evidence of concrete problems with the current arrangements for mergers of

entry-exit zones at national level. Any quantitative evidence, tables and examples (if

necessary, subject to confidentiality) are welcomed.

First of all, it is unclear why the topic of zone mergers should be brought up in the context of

harmonization of transmission tariffs. Irrespectively of this, Storengy would like to stress that

zone mergers can only be done after a proper cost benefit analysis and provided that they do

not degrade storage attractiveness or its effective accessibility. It is important to recall that

the larger the market zone, the more complex the system operations become and the higher

the probability of the occurrence of internal network congestions.



28

As the European experience has shown, zone mergers may significantly affect efficient market

functioning and may have a detrimental impact on storage. The latter can be observed in

Germany where successive mergers of market zones, realized without adequate investment in

networks, have impacted the level of firm transmission capacity guaranteed by TSOs at

storage interface points. Currently, the firm transmission capacity at existing storage facilities

in Germany is guaranteed on average at the level of 80% in the GASPOOL market area and at

50% on average in the NetConnect Germany market area; the remaining part being

interruptible10. Moreover, the recent proposals made by German TSOs in their new network

development plan will aggravate the situation for storage : this proposal envisages that only

temperature dependent transmission capacity will be granted to new storages (instead of firm

freely allocable capacity). This will further restrict the effective access to storage to the

detriment of storage users and may limit market liquidity (for instance, withdrawal in warmer

weather conditions for trading purposes will no longer be possible on a firm basis). This

unintended impact of zone merger highlights the importance of a proper prior cost-benefit

analysis so as to assess the potential investments needed and their costs as well as the impact

on adjacent infrastructures.

10.2. Please advise, if there are alternatives or additional requirements within Tarification setting

harmonization steps, to accommodate ‘Effects Entry-Exit Zone mergers’ (once there). Please

consider the Initial (draft) Impact assessment, when answering.

No answer.


11. What additional tariff structure measures do you envisage could improve the network code?


Please also, if relevant, suggest and explain reasons why any of the proposed measures should

rather have been left to voluntary exchange of best practices at national level (e.g. via Guidelines of

Good Practice)11.

10 From: Scenario Framework for Network Development Plan Gas 2013, October 2012

11 Please e.g. specifically consider if the FG/NC should include an EU-wide provision providing for “incentives” for

implementation of CMP measures, and or additional EU-wide provisions ensuring that transmission system



29

No answer.

12. Please share below any further comments concerning the draft Framework Guideline.

Storengy has no further comments.

13. Please comment on any factual incorrectness of the attached Initial (draft) Impact Assessment, if

possible with specific page references, including quantitative evidence, tables and examples from

your experience in the gas market(s) (if necessary, subject to confidentiality).

No answer.

Thank you very much for your contribution, and do not hesitate to contact ACER staff if you have any

questions regarding the questions.

operators do not experience detrimental effects as consequence of the roll-out of EU-wide implementation of the auctions under CAM NC and/or other NC.